The Bloc set to face some serious economic issues in 2019
If it were not for Brexit I think the Pound could be making gains against the Euro. I am of the opinion the Euro could be in for a rough 2019.
The situation with Greece has seemingly been swept under the carpet and Italy has entered into a recession and is second only to Greece on national debt. Germany is the engine room of the Eurozone and has only just avoided recession. There is also concern regarding the increase in support of right wing parties in France and Germany. This has the potential to cause political uncertainty and in turn weaken the Euro.
The situation with US trade should also be noted. The Trump administration has made some serious threats including a potential huge tariff on vehicles which would hit Germany hard due to it’s heavy reliance on vehicle exports.
Let us also look at Quantitative Easing (QE). QE is a controversial monetary policy in which a central bank purchases securities in order to lower interest rates and boost money supply. It has been used on several occasions around the globe delivering mixed results. It will be interesting to see how the Eurozone copes without it. The European Central Bank (ECB) put an end to QE in December. It was at one stage up to €80mil in monthly increments. Although ECB President, Mario Draghi has said in the past that QE was working current figures show that the bloc is experiencing the lowest levels of growth since 2014. It will be interesting to see how the Eurozone will deal with the above issues without the aid of QE.
Despite the fragility of the pound I think later in the year we could see some gains for Sterling following Article 50.
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